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Zambezi Nickel Ltd (LMY)

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Tuesday 06 December, 2005

Zambezi Nickel Ltd

Interim Results

Zambezi Nickel Ltd
06 December 2005

6 December 2005

                             Zambezi Nickel Limited

                          ('Zambezi' or the 'Company')

            Interim Results for the 6 months ended 30 September 2005


Zambezi, the AIM-quoted African nickel exploration and development company,
today announces its unaudited interim results for the 6 months ended 30
September 2005.


Highlights

•    Trenching programme complete, best intercepts 42 metres at 0.9% nickel
     and 16 metres at 1.6% nickel

•    New nickel sulphite potential- targets identified from helicopter-borne 
     magnetic programme

•    Q4 2006 target for JORC compliant resource at Paulwi and Mitaba West

Following admission to AIM in October 2005, Zambezi Nickel has aggressively
pursued an exploration strategy to develop the Company's two main nickel
projects; Mitaba and the Paulwi in Zambia. I would like to thank everyone for
there substantial efforts in moving the projects forward and following
processing of all data from the 2005 field season I think we are going to have a
very exciting year in 2006.

A trenching programme was completed to map and sample the largely concealed
ultramafic units at Mitaba West. Best intercepts to date include 42 metres at
0.9% nickel (Trench 7000mE) and 16 metres at 1.6% nickel (Trench 6950mE). These
results are considered highly significant and confirm the presence of a
potentially mineralised komatiite lava sequence, similar to those found at the
11 million ton per annum Mt Keith nickel deposit in Western Australia.

The integration of high-resolution helimagnetic data at Mitaba with surface and
trench mapping has revealed the positions of the highly prospective earliest
komatiite flows and basal contact zones at both Mitaba West and Mitaba Hill.
Several preliminary target zones for massive nickel sulphide deposits have also
been located.

The integration of the high-resolution helimagnetic data at Paulwi with mapping
has revealed the presence of a larger ultramafic body than previously
appreciated, with possible internal layering and significant complexity.
Isolated, more intense magnetic features along the interpreted gross basal
contact of the main intrusive body offer encouragement for the presence of
massive nickel sulphides associated with magnetic pyrrhotite.

Commenting on the results, Paul Rankine, CEO of Zambezi said:

'The 2005 field season has been very productive with assay results confirming
the substantial size of Mitaba West, of 2,400m x 340m and Mitaba Hill at 2,700m
x 480m. Once we have processed all the data from the season, Zambezi will be in
an excellent position to drill test both the massive and disseminated nickel
sulphide targets at Mitaba and Paulwi. We continue to believe that there is the
potential to generate a JORC compliant nickel resource on these properties by
the fourth quarter in 2006.'

For more information, please contact:

Paul Rankine                          Laurence Read
Zambezi Nickel Limited                Conduit PR
Tel:     +44 1428 656 429             Tel:     +44 20 7618 8760
Mob:     +44 795 280 7110             Mob:     +44 797 995 5923

Downloads from the Zambezi Website at www.zambezinickel.com

The information in this report that relates to Exploration Results is based on
information compiled by Mr Noel Sheppy, who is a Member of The Australasian
Institute of Mining and Metallurgy. Mr Sheppy is a Competent Person as defined
in the Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves. Mr Sheppy consents to the inclusion in the report of the
matters based on the information in the form and context in which it appears.


Statement by Paul Rankine, Chief Executive's Review

Corporate activities

Zambezi was pleased with the result of the offer of 9,458,333 new ordinary
shares of 1p each of Zambezi to qualifying shareholders of Zambezi Resources at
10p per ordinary share to raise £945,833. Applications were received from
qualifying shareholders for 7,408,523 ordinary shares, which were allotted in
full. In addition, valid applications were received from qualifying shareholders
for 1,264,279 ordinary shares in excess of their basic entitlement. These
applications were also allotted in full. W.H. Ireland Limited placed the balance
of 785,531 ordinary shares not taken-up under the offer.

As a result of this offer for ordinary shares, the concurrent issue of 6,522,989
placing shares, and the conversion of 900,000 preference shares, Zambezi
Resources' holding in Zambezi reduced from 100% to 49.63%. Full subscription to
both the offer and placing thus resulted in gross proceeds of £1,598,132.

The entire issued share capital of Zambezi was admitted to trading on AIM and
dealing commenced on 31 October 2005. The 4,729,167 offer options, which have an
exercise price of 10p, are expected to commence trading shortly.

Exploration activities

Ongoing nickel sulphide exploration on the Mitaba and Paulwi projects in
south-eastern Zambia has defined a komatiitic sequence considered highly
prospective for the presence of disseminated nickel sulphide mineralisation at
the Mitaba Hill and Mitaba West Prospects, in addition to the potential for
massive nickel sulphide targets, and has upgraded the prospectivity of the
Paulwi project area for massive nickel sulphide targets.

Mitaba Project

Since the Competent Persons Report was completed, continuing exploration on the
Mitaba Project has added considerable knowledge and support to the Project's
disseminated nickel sulphide prospectivity.

Recent activities have focussed on the Mitaba West Prospect, which had not been
mapped in detail during former exploration activities during the 1960's, but
where scattered outcrop indicated the presence of an ultramafic complex
comparable in extent to the well-exposed sequence at Mitaba Hill.

The Mitaba West Prospect is located 3 kilometres west of Mitaba Hill. Soil and
colluvial cover obscures much of the central and southern parts of the prospect,
including much of the prospective basal contact. Consequently, a trenching
programme was completed to sample and map the ultramafic units. The programme
comprised of seven trenches (959m) which were channel sampled over two-metre
sample intervals. Best intercepts to date include 42 metres at 0.9% nickel
(Trench 7000mE) and 16 metres at 1.6% nickel (Trench 6950mE), both located
adjacent to the concealed, earliest serpentinised dunite lava flow units. These
intercepts approximate true widths. These results are considered highly
significant and confirm the presence of a potentially mineralised komatiite lava
sequence similar to those found in Western Australia.

The exploration programme at Mitaba West also involved detailed surface mapping
and a high-resolution helimagnetic survey (50m flight lines/40m terrain
clearance).

Magnetometry data was acquired over the entire project area and enabled high
definition of lava flow units at both prospects. Integration of the magnetics
with mapping has revealed a volcanic lava flow architecture and defined the
location of the most highly prospective basal contact zone and earliest
komatiite flows at both prospects. Channel-margin environments have also been
interpreted and will be prospected closely in the future for massive nickel
sulphide bodies forming at the base of subordinate channels, where slow lava
flow rates or ponding may have enabled gravity concentration of nickel sulphide
droplets. Several preliminary target zones (subordinate lava channels) for
massive nickel sulphide deposits have been located along the gross basal contact
at Mitaba West. These target features will be assessed in conjunction with
time-domain EM data (VTEM helicopter-borne survey underway) which will test for
the presence of electrical conductors potentially associated with massive nickel
sulphide mineralisation in these positions.

The high level of detail gained from exploration at Mitaba West has been applied
to Mitaba Hill, where ground-truthing and petrographic work has refined the
geological understanding and confirmed a likely extrusive genesis for the
ultramafic units.

Optical and electron microscope work conducted on samples from Mitaba Hill is
encouraging and confirms the presence of nickel sulphide mineralisation
consistent with the extrusive exploration model. Examples of disseminated
pentlandite and finer grained millerite have been identified in serpentinised
mesocumulate dunite specimens of unsplit core (discarded by Zamanglo at Mitaba
Hill).

Exploration results for the Mitaba Project provide the basis for an initial
phase of critically-targeted diamond drilling (3,282 metres) aiming to define
inferred resources of disseminated nickel sulphides at both prospects. Drilling
is planned to begin early in the 2006 field season.

Paulwi Project

The Paulwi project area is located 48 kilometres east of Mitaba and is
considered highly prospective for intrusive related Ni-Cu-PGE mineralisation.

High-resolution helicopter-borne magnetometry (50m flight lines/40m terrain
clearance) was collected over the area and reveals the presence of a larger
ultramafic body than previously appreciated, with possible internal layering and
significant complexity. Isolated, more intense magnetic features along the
interpreted gross basal contact of the main intrusive body offer encouragement
for massive nickel sulphide associated with magnetic pyrrhotite (Figure 4).
Results from the ongoing helicopter-borne time-domain EM survey (VTEM) are
expected to reveal any massive nickel sulphide targets along the interpreted
basal contact, which will be assessed further at a later date.

Outlook

The 2005 field season has been very productive with assay results confirming the
substantial size of Mitaba West, of 2,400m x 340m and Mitaba Hill at 2,700m x
480m. Once all the data from the 2005 field season has been processed, Zambezi
will be in an excellent position to drill test both the massive and disseminated
nickel sulphide targets at Mitaba and Paulwi. The VTEM survey is underway, with
results expected early in the New Year. Potential drill targets for the 2006
massive nickel sulphide campaign are expected to be defined well ahead of the
start of the drill season.

We continue to believe that there is the potential to generate a JORC compliant
nickel resource on these properties by the fourth quarter in 2006.

Paul Rankine
CEO
6 December 2005

The information in this report that relates to Exploration Results is based on
information compiled by Mr Noel Sheppy, who is a Member of The Australasian
Institute of Mining and Metallurgy. Mr Sheppy is a Competent Person as defined
in the Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves. Mr Sheppy consents to the inclusion in the report of the
matters based on the information in the form and context in which it appears.


Financial Statements

The following information is prepared by the Company on a consolidated basis in
accordance with International Accounting Standards, the historic cost convention
and in line with the Company's established accounting policies. It has not been
audited.

Since Zambezi Nickel Limited did not commence business until July 2005, there
are no comparative figures for prior periods.


Consolidated Income Statement
For the six months ended 30 September 2005

                                                     Six months ended
                                                        30-Sep-05
                                                            £
Operating income                                            3

Expenses                                               (7,731)

Group operating loss                                   (7,728)

Loss after tax for half- year                          (7,728)

Basic and diluted loss per share                      (0.0005)


Consolidated Cash Flow Statement
For the six months ended 30 September 2005

                                                     Six months ended
                                                        30-Sep-05
                                                            £
Cash flows from operating activities

Payments to suppliers and employees                    (7,559)

Interest received                                           3

Net cash utilised by operating activities              (7,556)

Cash flows from investing activities

Payments for mineral interests                         (2,165)

Purchase of property, plant and equipment                   -

Net cash utilised by investing activities              (2,165)

Cash flows from financing activities

Net proceeds from issue of share capital              221,340

Loan repayment                                              -

Net cash generated from financing activities          221,340

Net increase in cash and cash equivalents             211,619

Cash and cash equivalents at beginning of the year          -

Cash and cash equivalents at end of the year          211,619


Consolidated Balance Sheet

At 30 September 2005


                                                        30-Sep-05
                                                            £
ASSETS

Non-current assets

Property plant and equipment                                -

Mineral Interests                                     980,797

Total non current assets                              980,797

Current assets

Prepayments and receivables                             1,909

Cash at bank and in hand                              211,619

Total current assets                                  213,528

Total assets                                        1,194,325

EQUITY AND LIABILITIES

Current liabilities

Trade and other payables                               56,315

Accruals and provisions                                39,598

Zambezi Resources Limited                              18,929

Total current liabilities                             114,842

Total liabilities                                     114,842

Equity

Issued capital                                        166,336

Preference shares                                       9,000

Share premium account                                 911,452

Translation reserve                                       423

Accumulated loss                                       (7,728)

Total equity                                        1,079,483

Total equity and liabilities                        1,194,325

Number of shares in issue                          16,633,621

Net asset value per share                                0.72



Statement of Changes in Equity
For the six months ended 30 September 2005

Issued Capital                                   No of shares       Issued capital         Share premium

Ordinary capital

8 July 2005. Subscriber shares                        700,000                7,000                     -

22 August 2005. Zambezi Resources Limited          15,933,621              159,336               911,452

Totals                                             16,633,621              166,336               911,452

Preference

22 August 2005. Directors and executives              900,000                9,000                     -

Totals                                                900,000                9,000                     -


Events since date of balance date

•    On 24 October 2005, following the successful IPO, the company issued 
     15,981,332 ordinary fully-paid shares at 10p each. The preference shares
     converted to ordinary shares on 24 October 2005. The current number of 
     shares on issue as a result of the above, there are now 33,514,943 ordinary 
     fully-paid shares on issue.

•    On 24 October 2005, the Company issued 4,429,166 offer options pursuant to 
     the terms of the issue of the offer shares on 31 October 2005. The options 
     entitle the holder to subscribe for one ordinary share in the company at
     a price of 10p. The options expire on 31 October 2006.

•    As a result of the company listing, Paul Rankine will be issued a total of 
     800,000 options. The options are in two tranches: 400,000 to be issued
     on 31 October 2006 at an exercise price of 15p and a further 400,000 to be
     issued on 31 October 2007 at an exercise price of 20p. Both tranches of 
     options expire on 31 October 2010.


Notes

1.   No dividends were proposed or paid during the period.

2.   In view of the group's loss position for the period, there is no 
     requirement for a reconciliation of prima facie tax payable on the
     accounting profit to tax expense.

3.   Pursuant to a warrant instrument dated 28 September 2005, WH Ireland 
     Limited has been granted a warrant by the company whereby it can subscribe 
     in cash for ordinary shares up to 3% of the issued capital of the Company 
     at a price of 10p. The warrant is exercisable in whole or in part at any
     time until 31 October 2008.

4.   Exploration expenditure and evaluation costs relating to expenditure on 
     prospects still at an exploratory stage are accumulated in respect of each 
     separate area and they are carried forward where the right of tenure is 
     current and they have not yet reached a stage that permits reasonable
     assessment of the existence of economically recoverable reserves. Where an 
     area of interest is abandoned or the Directors decide that it is not 
     commercially viable, any accumulated costs in respect of that area will be 
     written off in the financial period in which the decision is made.


                      This information is provided by RNS
            The company news service from the London Stock Exchange